Additional Coverage Types

Employment practices liability insurance (EPLI)

Numerous state and federal laws provide job candidates and employees with protections from discrimination and other unfair workplace practices. The number of employee lawsuits has increased in recent years, and any size business is vulnerable to this type of risk. Small businesses can be especially vulnerable because they are less likely to retain employment attorneys or have detailed employment policies and training programs.

In addition to taking steps to reduce your risk of employee lawsuits, you can financially protect your business by purchasing employment practices liability insurance (EPLI). Employment practices liability is generally not covered by general liability insurance, but can be purchased as a stand-alone policy or added as an endorsement to a Business Owners Policy or Commercial Package Policy. Bear in mind that EPLI coverage may have more limits and exclusions as part of a package policy.

EPLI covers companies against claims or lawsuits filed by employees, former employees and employment candidates regarding their employment relationship with an employer. This type of coverage protects the company, its directors, and officers, as well as current and former employees. EPLI policies may also cover seasonal employees, leased employees and independent contractors.

What EPLI covers

EPLI provides coverage for legal costs, settlements and judgments that arise from claims of:

Discrimination, based on age, race, gender and other factors.
Sexual harassment.
Wrongful termination—including constructive discharge, in which an employee resigns as a result of the employer creating a hostile work environment; and retaliatory discharge, in which an employee is fired as punishment for engaging in a legally protected activity.
Breach of employment contract.
Infliction of emotional distress or mental anguish.
Failure to employ or promote.
Wrongful discipline or demotion.
Mismanagement of employee benefits.
Defamation.
Privacy violations.
Violation of the Family Medical Leave Act or other such laws.

Some policies contain a catch-all category to provide coverage for claims of discrimination based on protected categories (e.g., sexual orientation) that are not covered under federal discrimination statutes, but may be covered by state or local law.

EPLI coverage can also protect the business owner from meritless claims brought by disgruntled employees.

What’s not covered

While EPLI covers many areas of employment risk, most policies have certain exclusions, such as violations of the National Labor Relations Act, the Worker Adjustment and Retraining Notification Act, Occupational Safety and Health Act (OSHA), and the Employee Retirement Income Security Act (ERISA), as well as claims arising under workers compensation laws. EPLI also will not cover punitive damages or claims resulting from criminal acts. Privacy violations caused by a computer breach also may not be covered by EPLI.

Director's & Officer's

While business insurance policies by definition provide coverage for the business itself, individual company officers may still be personally exposed to financial losses resulting from a lawsuit. To protect your company’s leadership, you may want to consider purchasing directors and officers (D&O) liability insurance.

What D&O covers

Directors and officers is a type of liability insurance that covers individuals for claims made against them while serving on a board of directors and/or as an officer. This type of policy can be written to cover directors and officers of for-profit businesses, privately held firms, not-for-profit organizations and educational institutions. There are several elements—called “Sides”—to a D&O policy, including:

Side A—Protects a corporation’s directors and officers when the company cannot indemnify the individuals.
Side B—Reimburses the organization when it indemnifies the individuals, thus protecting the company’s balance sheet
Side C—Also known as “entity coverage,” this eliminates disputes of coverage allocation when both the directors and officers and the insured organization are named as co-defendants in a securities lawsuit.

A wide range of claims against a business have the potential to target company leadership for responsibility—and liability. Business leaders can be held responsible for a company’s failure to comply with regulations and to provide a safe and secure workplace. In addition, if a company is found liable for losses because of operational failures and mismanagement, directors and officers may be exposed to liability as well. The types of claims that may target company leadership individually as well as the company itself typically include:

Shareholder suits over company or stock performance.
Creditor or investor suits over mismanagement or dereliction of fiduciary duties.
Misrepresentation in a prospectus.
Decisions exceeding the authority granted to a company officer.
Failure to comply with regulations or laws.
Employment practices and HR issues.
Pollution and other regulatory claims.
Cyber liability.

What’s excluded?

Standard exclusions in a D&O policy typically include:

Fraud.
Personal profiting.
Accounting of profits, and other illegal compensation exclusions.
Pending and prior litigation.
Prior (late) claim notice.
Bodily injury/property damage.
Insured versus insured claims.
ERISA.

Cyber Liability

In recent years, there have been an increasing number of costly computer hacking attacks against large companies, such as Target and Home Depot. But smaller companies face computer liability risks as well. Virtually all businesses use information technology (IT) in some way—to communicate via email, to provide information or services through a website, to store and use customer data and more. Your business can be held liable if certain data is compromised, not only by hacking attacks but even if a smartphone is lost or a laptop computer is stolen.

The risks of cyber liability are evolving rapidly, with new risks emerging as technology advances and new regulations are put in place. Insurance experts now consider the risk of cyber liability losses to exceed the risk of fraud or theft. In this tumultuous environment, your business can take several steps to limit risks, including purchasing cyber liability insurance.

What are your cyber liability risks?

If your computer systems are hacked or customer, employee or partner data is otherwise lost, stolen or compromised, the costs of response and remediation can be significant. Your business may be exposed to the following costs:

Liability—You may be liable for costs incurred by customers and other third parties as a result of a cyber attack or other IT-related incident.
System recovery—Repairing or replacing computer systems or lost data can result in significant costs. In addition, your company may not be able to remain operational while your system is down, resulting in further losses.
Notification expenses—In several states, if your business stores customer data, you’re required to notify customers if a data breach has occurred or is even just suspected. This can be quite costly, especially if you have a large number of customers.
Regulatory fines—Several federal and state regulations require businesses and organizations to protect consumer data. If a data breach results from your business’s failure to meet compliance requirements, you may incur substantial fines.
Class action lawsuits—Large-scale data breaches have led to class action lawsuits filed on behalf of customers whose data and privacy were compromised.

What cyber liability insurance covers

Some standard business insurance policies, such as a Business Owners Policy (BOP), may provide coverage for certain types of cyber incidents. For instance, if you lose electronic data as a result of a computer virus or hardware failure, your insurance may pay recovery or replacement costs. To extend coverage for a fuller range of cyber liability risks, you will need to purchase a stand-alone cyber liability policy, customized for your business. This type of policy can cover several types of risk, including:

Loss or corruption of data.
Business interruption.
Multiple types of liability.
Identity theft.
Cyber extortion.
Reputation recovery.

Some of our targeted industries

While Sanford Family Insurance can support nearly every situation, below are the industries that Farmers has a strong appetite and business areas that we believe we can better compete.

Sanford Family Insurance